When your U.S. Saving Bonds mature – or if you redeem a bond before maturity – you will owe income tax on the accumulated interest. The income tax will still be due even if you leave your bonds to your heirs. However, there are ways you can spare your heirs from paying income tax on your Savings Bonds while helping Sacred Heart Southern Missions.
Unfortunately, you cannot avoid the income tax by simply giving the Savings Bonds to SHSM while you are alive. U.S. Treasury rules also prohibit naming a charity as co-owner or beneficiary of a Savings Bond, but there are other options.
A Gift by Will – You can leave your Savings Bonds to SHSM in your will and your estate will avoid taxes on the accumulated interest. A provision in your will stating that the Savings Bonds should be gifted to SHSM when you die will allow your estate administrator to distribute the bonds directly to SHSM for redemption. When SHSM redeems the bonds there will be no tax due because we are tax-exempt.
Redeem the Bond and Make a Deductible Gift – You might consider redeeming your Savings Bond now and contribute the cash to SHSM. The accumulated interest will be added to your taxable income for the year but, if you itemize your income tax deductions, you can offset the additional income with the charitable deduction for your cash gift.
Thank you as always for considering different ways to support out vital work!